Sirius XM Shareholders Wasted a Vote


Sirius XM Radio (NAS: SIRI) investors sent a clear mandate in last week's annual shareholder meeting. Shareholders overwhelmingly voted to boot Leon Black from the satellite-radio provider's board of directors.

A whopping 955,186,887 shares were voted against retaining Black on Sirius XM's board, compared with the 512,411,779 shares cast to keep him aboard.

Oh, and the vote was irrelevant.

The Wall Street Journal points out that Black gets to stick around -- despite the minimal support from shareholders who are supposed to have a say in makeup of a company's board -- because Sirius XM uses plurality voting rules in filling out its board.

"The slate will always be elected, regardless of votes, so long [as] no challengers for open board seats receive more 'for' votes," the Journal explains. Since the media giant nominated only eight directors for eight slots, Black was going to be retained no matter what.

So why is there a groundswell against Black?

It's not because he isn't competent or qualified. Black is the CEO and co-founder of Apollo Global Management (NYS: APO) , and he's been on the board since 2001. However, his attendance at board meetings has been called into question by the company's filings and market chatter from activist investors. He may be spreading himself too thin to serve on the Sirius XM board if the critics are right.

An absentee director -- if that is the case -- isn't necessarily the end of the world. Black's compensation of $70,000 a year in stock option grants is modest, and surely he must be a contributor outside the board meetings if the company keeps him on. However, these are times at Sirius XM that demand the board's complete attention.

Liberty Media (NAS: LMCA) has grown its effective stake in Sirius XM to 46.2%, and this should be an "all hands on deck" situation for the board to be monitoring. CEO Mel Karmazin has been vocal lately about not wanting to work for anybody else, so the board may have some big decisions to ponder if Liberty Media achieved de facto or actual control.

Then again, one can also argue that Karmazin and his fellow executives are there to serve the shareholders first. If the wishes of investors are being ignored in the board vote, one can argue that Karmazin is already working for somebody else -- himself.

Running of the bulls
I remain bullish on Sirius XM's future. It should come as no surprise that I'm promoting the CAPScall initiative for accountability by reiterating my bullish call on Sirius XM for Motley Fool CAPS.

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At the time thisarticle was published The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributorRick Munarrizcalls them as he sees them. He owns shares of Liberty Media and is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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